USASF Servicing illegally disabled vehicles and double-billed consumers, financial agency charges

USASF Servicing is being charged with illegal practices that harmed consumers with auto loans including disabling borrowers’ vehicles, improperly repossessing vehicles, double-billing borrowers for insurance premiums, and failing to return millions of dollars in refunds, according to a lawsuit filed Wednesday .

With its lawsuit, the Consumer Financial Protection Bureau is seeking to return money to consumers, impose civil penalties, and stop any future violations.

“The CFPB is suing USASF for a range of misconduct, including illegally activating devices that prevented borrowers from starting their cars,” said CFPB Director Rohit Chopra.

USASF serviced auto loans that were originated by an affiliate, U.S. Auto Sales, which was a buy-here-pay-here auto dealer and lender with 31 dealerships in the Southeast. USASF offered guaranteed asset protection and collateral-protection insurance, which are products that consumers can buy when they buy or lease a car.

In April 2023, U.S. Auto Sales wound down most of its businesses.

The CFPB alleges that USASF:

• Illegally disabled cars: Many auto lenders require that cars are installed with devices using GPS technology that allow the lender or servicer to prevent a borrower from starting a car. These devices are known as “kill switches” or “starter interrupters.” USASF incorrectly disabled vehicles at least 7,500 times and caused these devices to play warning tones in vehicles over 71,000 times during periods when the consumer wasn’t in default or was in communication with USASF about upcoming payments. USASF remotely disabled vehicles at least 1,500 times after promising consumers it wouldn’t.
• Failed to refund premiums to consumers: USASF offered consumers guaranteed asset protection, which covers some of the difference – or gap – between the amount a borrower owes on their auto loan and what the car insurance will pay if the vehicle is stolen, damaged, or totaled. When consumers paid off their loans early or USASF repossessed a car and charged off an account, consumers were supposed to get refunds of any guaranteed asset protection premiums paid in advance for periods where they’d no longer have coverage. USASF failed to obtain millions of dollars in refunds from the guaranteed asset protection administrator.
• Double-billed consumers and misapplied payments: When consumers were enrolled in collateral-protection coverage by a USASF affiliate, they were also charged for that same coverage by USASF. About 34,000 consumers were double-charged for the insurance each billing cycle, in some cases for more than a year, costing consumers millions of dollars. USASF also wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest. This misapplication of payments caused consumers to pay more than a million dollars in interest and fees that they wouldn’t have paid if USASF had correctly applied their payments.
• Wrongfully repossessed vehicles: USASF illegally repossessed the vehicles of some consumers who never qualified for repossession or had taken action to stop the repossession. In some cases, USASF sold the vehicles that it had wrongfully repossessed.

Auto loans are the third-largest category of outstanding consumer debt, after mortgages and student loans. In recent years, the cost of vehicles has risen substantially, leading to increased borrowing.

This lawsuit is a reminder to be alert when you buy a car and make sure you deal with reputable companies.